Public spending review

Robbing Penny To Pay Paula

THE PUBLIC spending review was an opening shot in New Labour's campaign for the next general election. The review tries to create the impression of a big increase in public spending, while trying to outbid the Tories' promises to cut out 'waste' in the public services.

Overall, however, there will not be a big increase in spending, which will remain at £380 billion for 2007-08. Health and education will get more, but other services will get less. It is a classic case of robbing Penny to pay Paula.

Civil servants facing compulsory job losses will be the victims of severe cutting. Remaining civil service workers will face cut sick pay and other benefits.

A big slice of the extra spending on education and health will go directly to big business, as the result of PFI schemes, privatisation, private consultancies, etc.

Brendan Barber, TUC general secretary, deplored the civil service job cuts. But, "Our overall feeling is positive," he said, because of "unprecedented investment" in health, education, childcare, etc.

Unfortunately, ex-Tory chancellor of the exchequer, Kenneth Clarke, was closer to the mark: "The amazing this is, he [Brown] was actually announcing a very sharp reduction in the rate at which public spending is going up... This is actually intended to be the first Labour tight-spending round since they took office..."

For its first two years, New Labour froze public spending at Tory-government levels. Then it rose steadily from 37.4% in 1999-2000 to a projected 42.3% by 2007-08. Nevertheless, this is still below the 44.2% recorded under the last Tory government in 1992-93 and the 49.9% in 1975-76 under the Wilson-Callaghan Labour government.

Brown's spending projections, moreover, are based on very optimistic assumptions about economic growth in Britain and the world. He is banking on a 3.5% growth of GDP annually.

A crash in the British housing market or a downturn in the world economy could throw everything off course. To sustain public spending at the promised levels, Brown would then have to raise taxes (which he says he will not do) or slash public spending.